A sign outside a Nordstrom Rack retail store in New York on August 25, 2022.
Gabby Jones | Bloomberg | Getty Images
Nordstrom Earnings reported Tuesday beat Wall Street expectations and showed the department store is making strides in cutting costs and improving efficiency.
While the Seattle-based retailer reported 25 cents per share above forecasts, its full-year guidance was tepid.
Nordstrom now expects adjusted earnings per share of $1.75 to $2.05, compared with the previous range of $1.65 to $2.05. It expects sales to fall 1% to rise 1% from a year ago, compared with previous guidance of a 2% decline to a 1% rise.
Nordstrom CEO Erik Nordstrom said in a press release that despite the cautious guidance, the company remains optimistic about the second half of the year.
“We are encouraged by our solid second quarter results, continued revenue strength across both brands, and the progress we have made in expanding gross margin and improving profitability,” Nordstrom said. “We are optimistic about the remainder of the year. We are confident about our future and look forward to maintaining the momentum we have built.”
Shares rose about 5% in after-hours trading.
Here’s how the department store performed in the fiscal second quarter compared to Wall Street expectations, according to a survey of analysts by LSEG:
- Earnings per share: Adjusted 96 cents, expected 71 cents
- income: US$3.89 billion, expected US$3.9 billion
The company reported net profit of $122 million, or 72 cents a share, for the three months ended Aug. 3, compared with $137 million, or 84 cents a share, a year earlier. Excluding one-time items related to supply chain damage, the retailer reported adjusted earnings of 96 cents per share.
Sales increased to US$3.89 billion, an increase of approximately 3.4% from US$3.77 billion in the same period last year. Revenue was slightly below analysts’ expectations.
Comparable sales for the entire company increased 1.9%, and gross merchandise value increased 3.5%. It’s unclear how much of the increase in GMV is related to higher prices versus higher sales.
As consumers continue to reduce discretionary spending in the face of persistent inflation and high interest rates, retailers have been working to improve operations and cut costs to protect profits from weak demand.
Nordstrom’s profit fell during the quarter compared with the same period last year, but it has grown over the past six months. Last year, Nordstrom reported a net loss of $67 million for the six months ended July 29, 2023, but in the same period this year, its net profit was $83 million.
Nordstrom said it is working to improve its supply chain. Last quarter, the company said online order delivery times improved by more than 5%. It also improves how merchandise reaches customers and stores, which it says helps increase conversion rates and reduce return rates.
Another area of focus for the company is growing its discount brand, Nordstrom Rack. Nordstrom Rack has been growing momentum over the past few quarters and has helped support the company’s overall performance. This quarter, Nordstrom Rack sales increased 8.8%, and comparable sales increased 4.1% compared with the same period last year.
In contrast, Nordstrom’s mainline product net sales and comparable sales grew only 0.9%.
Nordstrom has been working to build more Rack stores, opening 11 new stores so far this fiscal year and aiming to open at least 22 by the end of the year. The focus on Rack is critical to Nordstrom’s ability to compete with off-price giants TJX Ltd.owner of TJ Maxx and Marshall’s, appeals to consumers who are still spending but are craving cheaper options and deals.
The off-price industry has been experiencing explosive growth for more than a year, but Rack missed the start of the trend. To turn around the decline, the company is focusing on opening more stores, hiring veteran staff at low prices and increasing its focus on well-known brands.
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